What Do the New O2 Rules Mean for You?

In implementing provisions of the Deficit Reduction Act, CMS issued its final rule on Nov. 1, 2006. Included in that rule are payment plans for oxygen equipment and services. Although the changes technically began Jan. 1, 2007, information and instruction has been scarce.

The Local Coverage Determination for oxygen does not include most of the changes. Despite an ongoing push for the repeal of the DRA oxygen provisions through the Home Oxygen Patient Protection Act (H.R. 621), to date, the rule is still final.

Following is a list of the specifics and their impact on your operation.

FINAL RULE REVIEW

Based on a recent “MLN Matters” article (MM5370), CMS provided the following explanation:

• Oxygen contents will continue to be reimbursed even if a beneficiary owns their own portable or stationary gas systems (liquid or stationary), as long as the medical necessity still exists.
• With regard to capping, Medicare will pay for a total of 36 months of continuous rental for oxygen equipment. The first day after the last rental month, the supplier must transfer title to the beneficiary.
• “Reasonable and necessary” maintenance and servicing of beneficiary-owned oxygen equipment will be paid for parts and labor not covered by a supplier’s or manufacturer’s warranty.
• For all existing patients who had oxygen equipment prior to Jan. 1, 2006, their 36-month rental period began Jan. 1, 2006, regardless of how many months they had already been renting the oxygen.

Additionally, in the final rule, Medicare established product classes for oxygen and introduced the new K0738, the code to be used for oxygen transfilling equipment and portable oxygen concentrators. CMS recognized that newer technology would eliminate the need for delivery and refilling of oxygen contents for portable systems.

The OGPE add-on payment for 2007 is $51.63. Specifically, it is made up of a home compressor that also fills portable oxygen cylinders and includes portable containers, regulators, flow meters, humidifiers, cannulas or masks and tubing.

Other price changes include the payment rate for stationary equipment at $198.40, a slight decrease from the past several years. Finally, CMS actually decided to increase monthly payment amounts for portable oxygen contents for beneficiary-owned liquid or gaseous oxygen equipment from approximately $20.77 to $77.45.

MAINTENANCE/SERVICE/REPAIRS

While CMS initially discussed the notion of purchasing oxygen equipment after 36 months’ rent, not much information was made available about what happens with repairs and maintenance after the patient owns the equipment.

But in a more current “MLN Matters” article (MM5461), there is discussion in more detail about the notion of maintenance and service. The article gives suppliers more specific information regarding the actual billing of maintenance and service and repairs.

Payment may be made for maintenance and service every six months, starting six months after the beneficiary owns the equipment. The article goes on to explain that you must bill for the oxygen equipment with the “MS” modifier, similar to the way capped rental maintenance and service used to be billed.

It also states that maintenance and servicing claims for oxygen equipment will not exceed two units of E1340 every six months. Replacement parts should be billed with the “RP” modifier. Further, the article states that E1399 (miscellaneous code) with “RP” will be accepted if there is no replacement code for the item.

In summary, it appears that Medicare will pay a maintenance and servicing fee every six months whether or not you actually perform the maintenance or service. In addition, if you actually perform the service, you will be entitled to a maximum of 30 minutes of labor and replacement parts.

Medicare will also pay for loaner equipment for up to a month just as it does now with other equipment. Finally, CMS makes it clear that actual payments for repair and labor are not covered if they are covered under a manufacturer’s or supplier’s warranty.

MISCELLANEOUS NUANCES

Interestingly, in another publication, CMS states that it will not pay for general maintenance and service of beneficiary-owned liquid and gas equipment. However, it will make one payment for pick-up and storage or disposal of liquid and gas equipment in the case when a beneficiary no longer medically needs it.

As opposed to the previous oxygen medical policy, replacement of accessories and supplies will be reimbursed after ownership transfers to the beneficiary.

REPLACEMENT

According to the same publication, surprisingly “suppliers are responsible for replacement of beneficiary-owned oxygen equipment or capped rental items for equipment that ceases to function due to the need for extensive repairs during the reasonable useful lifetime for DME, which is five years. This requirement would not apply in the case where replacement is covered under a supplier’s or manufacturer’s warranty.”

This means that even after the patient owns the oxygen equipment, if you are the supplier of the device, you are responsible for replacing it if repairs are too extensive and/or the manufacturer’s warranty doesn’t cover the item and it is still medically necessary during the five years. The five-year count begins with the initial date of rental.

BENEFICIARY SAFEGUARDS

Not only are suppliers responsible for replacing equipment that cannot be repaired and is less than five years old, they are also obligated to continue to furnish that item throughout the whole rental period except in certain circumstances specified in the final rule.

In other words, once you are the supplier, the patient (in most circumstances) stays with you. CMS also states that if you do not want to furnish maintenance, service or repair to beneficiary-owned equipment, you must inform the patient no later than two months prior to the title transfer.

Specifically, suppliers may not switch out equipment at any time during the 36-month rental period unless: (a) the item was lost, stolen, irreparably damaged, being repaired or no longer functions; (b) the physician orders different equipment; and (c) the beneficiary chooses to obtain a newer technology or upgraded item and signs an advanced beneficiary notice (ABN) acknowledging his or her liability.

In all cases, suppliers must replace the equipment with equipment of the same or better value. Additionally, if the patient moves either permanently or temporarily, he or she is permitted to obtain the equipment from another provider.

ASSIGNMENT

Further, CMS is requiring that the supplier disclose to the beneficiary its intentions regarding accepting assignment of all potential monthly rental claims for oxygen equipment/capped rental DME items. CMS will post this information on a Web site(s) indicating (1) the percentage of beneficiaries for which a supplier accepts assignment and (2) the percentage of cases for which the supplier accepted assignment during the beneficiary’s entire rental period.

SWITCHOUTS

So what does all this mean to HME oxygen providers? It means that before you accept an oxygen patient from another company (aka, a “switchout”), you will need to know why they have left the prior company, and you will need a pickup slip from the first company. The reason should be one of the exceptions noted in the “beneficiary safeguard” section.

Quite practically, since title eventually transfers to the beneficiary and you are ultimately responsible for replacement of the equipment, you should make an educated determination about the number of months you will be paid.

DISASTER PLANNING

Although you must transfer title to the beneficiary after the 36th month, if the item needs to be replaced, as the supplier, you are technically responsible. What Medicare didn’t write in the final rule is who is responsible for patient-owned equipment in the event of a disaster.

PURCHASING/INVENTORY

Knowing that you will be reimbursed differently for various oxygen modalities, you will need to purchase oxygen equipment accordingly. By the same token, since you are reimbursed an additional fee for a transfilling oxygen system — but will pay considerably more to obtain such equipment — you need to decide if and when you should dispense such items.

Obviously, if the doctor/referral source requests or prescribes a specific type of equipment, you will need to provide it or work with the referral source to find an alternative.

I recommend that you establish a threshold for oxygen patients and prescreen them to determine what type of equipment would best meet their needs. If, for example, the patient is agile and likely to leave home frequently, and he or she lives a considerable distance from your office/store, a transfill system might be appropriate.

You should also establish a cut-off point at which, if a patient will be using a certain number of portable tanks per week or month, he or she would be a candidate for a tranfill system. Train your intake staff accordingly and you will be better able to manage your base of oxygen patients.

SOFTWARE

Tracking your oxygen patients for months on rent is essential since the DRA took effect Jan. 1, 2006. Specifically, you should track the number of months on rent to know your potential exposure once oxygen is capped and equipment title transfers to the patient. After all, already half of the 36-month rental period has lapsed.

Knowing that you may or may not want to engage fully in the repair business, you should also track your oxygen inventory to determine your cost of repairs. How many times does an item break down? How often does it require a replacement part? Knowing how much revenue you garner on each item is essential for measuring profit margin.

You should also use the software to help your intake department decipher what type of equipment would best suit the patient. Will they be using portable oxygen and if so, is it possible to measure how often they’d use it (i.e., forecast the number of portable oxygen tanks they might need)?

Further, have the software measure the patient’s proximity to your office and/or other oxygen patients. Weigh this information against the other HME they use and the referral source relationship to determine the best oxygen equipment for the patient.

As you can see, the DRA’s impact on oxygen suppliers brings about significant change. As suppliers scramble to complete bid applications and wait to hear the verdicts, they cannot rest for a moment. Rather, they must continue to provide impeccable service and superior equipment just to get the next order.

Oxygen has long been the reason why providers can make other less charitable items work for their patients. Once a patient owns the oxygen equipment, it will become increasingly more difficult for providers to forge the same lasting relationships with their customers.

Rather than waiting for the 36th month to happen, become actively involved in working with your federal legislators on H.R. 621. Simultaneously, prepare your personnel, your referral sources and your software for the upcoming transfer of title.

Clearly, we are in for another adventure in the winding road with Medicare.

Miriam Lieber is president of Lieber Consulting, Sherman Oaks, Calif., specializing in operations management and reimbursement for the HME industry. She can be reached at 818/789-0670 or by e-mail at [email protected].

CQRC Worried About NCB’s Impact on Care for O2 Patients

After its release April 2, the Council for Quality Respiratory Care, a coalition of 11 home oxygen therapy providers and manufacturers who provide services to approximately 650,000 home oxygen patients, issued a statement of concern regarding CMS’ final rule on national competitive bidding.

The Medicare bidding program includes oxygen equipment and supplies, respiratory assist devices and continuous positive airway pressure devices and accessories, as well as sleep apnea services, supplies and equipment.

According to CQRC, the process “could jeopardize the level of quality of care for services the patients would normally receive, thereby destabilizing the benefit and providers alike. The new bidding process is based solely on price, thereby excluding therapy-related services and patient-support services essential to the delivery of quality care.

“The winning bid will simply result in the ‘lowest common denominator’ and not take into account these critical services. In addition, it discourages the use of higher-priced innovative technologies that government and health officials have supported in separate rule-making.

“The new bidding process risks sacrificing these critical components of the home oxygen therapy benefit that, taken together, encourage patient mobility, prolong quality of life and can result in reduced need for hospital stays and reduced costs to taxpayers in the long run.”

Further, the coalition said, CQRC “supports stronger quality standards than the accreditation requirements outlined in the final rule,” noting it does not include performance as a factor in the bidding process.

“Under this final rule, lower quality standards than what the CQRC supports, coupled with a bid structure that is designed solely to minimize upfront costs, induces providers to sacrifice service levels and quality of care to maintain price competitiveness, directly affecting quality and threatening safeguards,” said Peter Kelly, CQRC chairman and CEO of Pacific Pulmonary Services.

“In addition,” Kelly continued, “the competitive bidding process does not provide adequately for innovative new technologies and necessary patient services, both of which can improve patient outcomes and dramatically reduce Medicare costs.

“Despite CMS’ aggressive savings estimates, the massive DMEPOS cuts to the home oxygen benefit the past several years and also coming in 2009 have largely accounted for the savings expected from competitive bidding, increasing the likelihood the program will cost more to administer than it will save,” Kelly said.

“We simply can’t risk the introduction of a complicated, costly program that seeks to maximize savings at the expense of service levels and quality of care, especially at a time when home oxygen providers are trying to adjust to massive cuts resulting from the Medicare Modernization Act of 2003 and the Deficit Reduction Act of 2005, which are only now being realized.”

Members of CQRC include Pacific Pulmonary Services, Praxair, Respironics, Rotech, Sunrise Medical, AirSep Corp., Air Products Healthcare, American HomePatient, Apria Healthcare, Invacare Corp. and Lincare.